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Weyerhaeuser Co. v. Yellow Poplar Lumber Co., Inc.

United States District Court, W.D. Virginia, Abingdon Division

January 3, 2017

WEYERHAEUSER COMPANY, ET AL., ETC., Plaintiffs,
v.
YELLOW POPLAR LUMBER COMPANY, INC., ET AL., Defendants.

          Wade W. Massie and Seth M. Land, Penn Stuart & Eskridge, Abingdon, Virginia, for Range Resources-Pine Mountain, Inc., Range Resources-Appalachia, LLC, EQT Production Company, and EQT Production Nora, LLC; and Jennifer Shaver Friedel, Shaver Law Office, PLLC, Blacksburg, Virginia, for John J. Horschel, Henry T. “Hank” Horschel, William B. Douglas, Jr., Albert G. Friend, James F. Friend, and Jon Friend.

          OPINION AND ORDER

          James P. Jones, United States District Judge

         This case involves a dispute over ownership of the gas estate on land located in Virginia. The principal parties previously moved for summary judgment, which I denied as to all parties, and the case is set to proceed to trial. Defendants Range Resources-Pine Mountain, Inc., Range Resources-Appalachia, LLC, EQT Production Company, and EQT Production Nora, LLC (collectively “Range/EQT”) have now moved to dismiss the crossclaim asserted by defendants John H. Horschel, Henry T. “Hank” Horschel, William B. Douglas, Jr., Albert G. Friend, James F. Friend, and Jon P. Friend (collectively “Horschels/Friends”).

         I.

         I thoroughly reviewed the procedural history and facts of this case in my previous opinion denying summary judgment as to all parties and will not repeat them here. Op. & Order 4-11, ECF No. 428. However, since I issued my opinion denying summary judgment, certain events have occurred that warrant mention here.

         At the time I denied summary judgment, John M. Lamie was serving both as bankruptcy trustee for Yellow Poplar Lumber Company (“Trustee”) and as counsel for Horschels/Friends. A few days after I issued my opinion, the plaintiffs[1] sought to have Mr. Lamie removed as Trustee due to an alleged conflict of interest. Mot. to Appoint Substitute Bankruptcy Trustee, ECF No. 429. In response, Mr. Lamie moved to withdraw as counsel for Horschels/Friends.[2] Mot. to Withdraw as Counsel, ECF No. 437. I granted this motion and substituted Jennifer Shaver Friedel (formerly Jennifer L. Shaver) as counsel for Horschels/Friends. Order, ECF No. 443. Mr. Lamie continued to represent the interests of Yellow Poplar as Trustee.

         One week later, defendants Range/EQT moved to dismiss the crossclaim of Horschels/Friends for lack of standing. This motion has been briefed by Range/EQT and Horschels/Friends and is ripe for decision.[3]

         II.

         A bankruptcy trustee “has capacity to sue and be sued” on behalf of the estate. 11 U.S.C. § 323(b). This standing to sue is exclusive to the trustee: “[i]f a cause of action is part of the estate of the bankrupt then the trustee alone has standing to bring that claim.” Nat'l Am. Ins. Co. v. Ruppert Landscaping Co., 187 F.3d 439, 441 (4th Cir. 1999); see also Steyr-Daimler-Puch of Am. Corp. v. Pappas, 852 F.2d 132, 136 (4th Cir. 1988) (holding that when a “claim is property of the estate, the trustee is given full authority over it”). A bankruptcy estate includes “all legal or equitable interests of the debtor in property as of the commencement of the [bankruptcy] case.” 11 U.S.C. § 541(a)(1). A cause of action seeking a declaration of ownership of property - such as the one raised here by the Trustee and Horschels/Friends - is therefore part of the estate if the estate possessed an interest in the property when the bankruptcy proceeding began. See Vieira v. Anderson (In re Beach First Nat'l Bancshares, Inc.), 702 F.3d 772, 776 (4th Cir. 2012) (noting that “[a] debtor's right to bring a legal claim is part of the bankruptcy estate under . . . § 541(a)”).

         Range/EQT have moved to dismiss the claim of Horschels/Friends based on this principle of trustee-exclusive standing. They state that “[t]he Trustee and the Horschels/Friends have asserted identical claims” and argue that because these claims properly “belong to the bankruptcy estate, ” Horschels/Friends lack standing to assert them. Mem. Supp. Mot. to Dismiss 3-4, ECF No. 450. As a result, they say, the claims of Horschels/Friends should be dismissed for lack of subject matter jurisdiction.

         In response, Horschels/Friends argue that they “have a significant interest in this matter, and are appropriate intervenors under the law.” Mem. Opp'n Mot. to Dismiss 2, ECF No. 453. They note that they are not attempting to preempt the claim asserted by the Trustee and argue that dismissing their claim “will have the untenable effect of denying [them] the opportunity to pursue their claims” and will allow Range/EQT to “escape liability to Yellow Poplar.” Id. at 3. They also protest that if they are dismissed from the action and the Trustee is unsuccessful, their claim will be lost.

         III.

         I agree with Range/EQT that Horschels/Friends lack standing to pursue their crossclaim. The claim raised by Horschels/Friends is identical to that raised by the Trustee. Both parties seek declarations that they own the gas interest on the relevant property and that they are entitled to money damages. Because they allege that this interest was owned by Yellow Poplar at the time it entered bankruptcy, this claim is part of the bankruptcy estate. Neither the crossclaimants nor Range/EQT have suggested otherwise.

         It is clear that the Trustee has standing to assert these claims of the estate. See 11 U.S.C. ยง 323. The question is whether this standing is exclusive to the Trustee or whether Horschels/Friends, as successors in interest to Yellow Poplar's shareholders or creditors, have such standing as well. Yellow Poplar's bankruptcy occurred under Chapter 11. The Fourth Circuit has not directly addressed this question of standing ...


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